General – Energy Transition
Let’s be clear: the idea of a smooth, linear path to global climate targets is unravelling.
Rising energy demand, geopolitical fragmentation, and hard economic constraints are reshaping the transition into something far messier – and far more regional – than policymakers and many in the industry anticipated.
According to the latest outlook from Bain & Company, none of the modelled pathways to 2040 comes close to delivering on the ambitions of the Paris Agreement.
Demand is the elephant in the room
Global electricity demand is set to surge by 40% to 70% by 2040. And no—it’s not AI that’s driving this.
It’s households.
Cooling, heating, and basic electrification are doing more to reshape the load curve than hyperscale data centers. Add in industrial demand, and the picture becomes structural: over 60% of energy consumption sits in sectors that are slow, capital-intensive, and hard to decarbonize.
The uncomfortable truth? Electrification alone is not a silver bullet – it’s a demand multiplier.
Fossil fuels aren’t going anywhere (yet)
Despite record growth in renewables, fossil fuels remain deeply embedded in the system.
Even in aggressive transition scenarios, they still account for more than half of the global energy supply by 2040.
Oil demand proves particularly stubborn, with projections ranging from a peak near 108 million barrels per day to only a modest decline thereafter. Aviation, petrochemicals, and heavy transport are not transitioning at the pace headlines suggest.
Natural gas, meanwhile, continues to play the role nobody wants to admit is indispensable: the system balancer in an increasingly volatile power mix.
Renewables are winning – but not fast enough
Yes, solar and wind are scaling fast. Yes, they are often the cheapest option.
But deployment is constrained by realities that don’t fit neatly into net-zero narratives: grid bottlenecks, permitting delays, labour shortages, and fragile supply chains.
Tripling or even septupling capacity sounds impressive – until you factor in how much total demand is growing at the same time.
The system is becoming more complex, not less
Nuclear is back in the conversation. Storage is critical but not yet sufficient. Gas remains in the mix. E-fuels are politically attractive but economically fragile.
This is not a clean substitution story – it’s an increasingly complex system optimization problem.
And in Europe, ambitions around synthetic fuels highlight the gap between policy intent and industrial reality: high costs, technological uncertainty, and unclear scaling pathways.
The new reality: regionalization
The global energy transition is fracturing.
Different regions are moving at different speeds, with different constraints and priorities. Energy security, not just decarbonization, is now a primary driver of decision-making.
Supply chains for critical materials, lithium, copper, cobalt, are technically sufficient, but geopolitically concentrated. That’s a vulnerability the market is only beginning to price in.
What this means for the industry
As Jeroen Zijp, Partner at Bain & Company, puts it: “The energy transition is ultimately shaped by cost, feasibility, and energy security, and those differ by region. Translation: there is no single transition anymore. Even front-runners like the Netherlands are hitting physical limits, with grid congestion becoming a defining constraint despite rising investment.”
For energy companies, utilities, and industrial players, the implication is clear: stop planning for a global transition. Start operating in multiple local ones.
Capital is already shifting toward grids, storage, and firm capacity. Flexibility is becoming more valuable than long-term certainty.
